Interest only pilot v3 14.12.12

HML interest only pilot 2012

Strictly confidential

© HML 2012. All rights reserved.

High level benefits

Helping customers to remain in their own home after the end of their mortgage term.

Evidence to FSA pro-active action taken in contacting customers – regulatory risk is mitigated. Quality customer contact as opposed to just making contact.

Enable you to better understand the interest only risk within your portfolio.

27 customers (mortgage value £3.9m) actively progressing amendments to part & part/ C & I as a result of this pilot – improving credit risk of portfolio.

Achieve measurable customer response data - over 34% say they have a full repayment in place/ 4.2% have a partial repayment strategy – self-certified.

Raised awareness with customers some of whom are now instigating action that will help repay their mortgage.

2© HML 2012. All rights reserved.

Interest only client activity

3

Client 1 Client 2 Client 3

Approach:

’Customer response data gathering exercise (letter

and calls) that will support and inform follow up

strategies.’

Approach:

‘Regular customer contact (letter and calls), gathering

repayment strategy evidence. Instruct field agents near term expiry

where no contact achieved.’

Approach:

‘Options letter with access to a client branded

repayment/ part & part affordability calculator.’


Interest only pilot – contact strategy

500 customers

Initial contact by letter, posing two questions:Do they have a repayment strategy in place ? and if so,

What type of repayment strategy was being used ?

If no response was received, three outbound call attempts were made two-three weeks later to ask the same two questions.

All conversations were scripted to prevent the risk of providing advice.

Where customers were unsure or did not have a repayment strategy in place, the HML Consultant was able to provide the customer with

A list of repayment strategy options.

Details on how to contact some independent financial advisers where the customer could discuss the options in more detail.

Information that other IFA’s were available.


High level results

5

34%

4%5%

18%

4%

35%

0% 0%

Full Repayment

Partial Repayment

Not able to pay

Unsure/ will look in to call back

Contact details not valid

No contact


Successful contact strategy results

6

‘Only received 3 responses by letter - but no pre-paid envelope included.’


Outbound calls – successful contact times

7

‘305 successful contacts with customers = 61%’


Customers with ‘Full repayment strategy in place’

8

Most common repayment strategies

Sale of Property 26.74%

Multiple Repayment Strategies 26.16%

Sale of another asset 15.70%

Long Term Savings Plan 10.47%

‘172 customers in this sample said they have a repayment strategy that will fully repay their mortgage balance’ = 34.4% of 500 customers


Customers with ‘Partial repayment strategy in place’

9

‘21 customers in this sample said they have a repayment strategy that will partially repay their mortgage balance’ = 4.2% of 500 customers


No repayment strategy or unsure customers – Risk Profile

10

‘111 customers (£202.6m) from this sample have no repayment strategy or

unsure of what they intend to do’ = 22%


Customer feedback

Response LTV Term Remaining Age Balance

‘Plans to switch to C & I next year’ 88% 16 years 42 £233,400

‘Plans to pay with inheritance, savings and will look in to repayment next year’ 78% 17 years 47 £84,000

‘Will be selling property near the end of term’ 93% 10 years 55 £124,500

‘Unsure what to do and will speak to an adviser’ 103% 23 years 40 £59,500

‘Mr is already overpaying (credit arrears balance of £8,800)’ 93% 19 years 46 £64,000

11

Customer feedback: “I’m impressed by your pro-active approach to contacting your interest only customers. ”


Customers ‘moving to C & I’ following contact

12

Monthly payment increase from

interest only to repayment

Part and part or term extensions may need to be considered as options to support these customers.


HML - Key facts

• HML is a leading specialist financial outsourcer providing solutions to the mortgage, savings and loans markets

• Over 20 years’ experience managing customer accounts for some of the world’s biggest financial institutions

• Over £43bn residential and commercial mortgages currently under management

• 1,300 employees based across 3 UK sites, including a 450 seat call centre handling up to 13,000 calls per day

• A technology platform that has undergone a multi million investment to enhance functionality, control, compliance and stability


Interest only pilot v3 14.12.12

Economy & Finance

Transcript of Interest only pilot v3 14.12.12